BaFin Bans Ethena's USDe Token

BaFin Bans Ethena's USDe Token for MiCAR Violations

Germany's financial regulator, BaFin, has issued a ban on the public sale of Ethena GmbH's USDe token, citing violations of the Markets in Crypto-Assets Regulation (MiCAR).

Key Highlights:

• BaFin bans Ethena's USDe token.
• Ethena accused of selling unregistered securities.
• Ethena claims USDe remains redeemable via its BVI entity.

BaFin alleges that Ethena sold unregistered securities, breaching MiCAR regulations. The regulator has frozen Ethena's assets and appointed a compliance oversight representative. This action prioritizes investor protection and regulatory compliance.

Ethena Labs responded, stating that USDe remains redeemable through Ethena BVI Limited, despite BaFin's restrictions. They claim the token's stability is maintained by an algorithm using hedging derivatives. However, BaFin expresses concerns about Ethena's ability to meet MiCAR requirements regarding asset reserve management and capital compliance.

MiCAR, effective in 2024, requires regulatory approval for the public sale of asset-referenced tokens. While Ethena initially received a transitional permission, their subsequent application, submitted on July 29, 2024, failed to meet BaFin's standards.

BaFin advises USDe holders against seeking direct payments from Ethena GmbH. Secondary market trading remains unaffected. The regulator is also investigating other Ethena tokens, suspecting they may qualify as EU securities, further complicating the legal situation.

This situation underscores the increasing regulatory scrutiny of the crypto market. Businesses must ensure strict compliance to avoid regulatory action. The outcome of BaFin's investigation and any subsequent legal actions will be closely watched by the industry.

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